The Certain-Funds Clause That Saved a $38M Pharmacy Sale

The situation

Chidi, a pharmacist, and Reza, a university professor, had spent close to twenty years building a group of community pharmacies across Northern Ontario, anchored in North Bay. Chidi ran the business day to day; Reza had put in early capital and held a minority stake but kept his full-time academic career. When a mid-sized buyer group approached them with an offer to acquire the whole operation for roughly $38 million, the two agreed it was time to sell. Chidi was ready to step back from operations, and Reza wanted to simplify an investment he had never actively managed and could not have kept running himself.

The buyer group was led by an experienced operator, Niloufar, who planned to fund the purchase with a mix of her group's own equity and acquisition debt from an outside lender. On paper the deal looked straightforward: a healthy, profitable business with steady prescription volume and stable staff, sold to a buyer with real industry experience and a credible plan to keep the pharmacies running under the same name. The complication was not the business. It was how the buyer intended to pay for it. Chidi and Reza had never sold a business before, and their first instinct was to treat the buyer's confidence about financing at face value. They came to us wanting the deal papered up quickly; our first job was to slow that instinct down long enough to look at how the money was actually going to arrive on closing day.

The risk in the deal structure

Our team was retained to act for Chidi and Reza on the sale. Early in the negotiation, we asked the buyer's side for details of how the roughly $38 million purchase price would actually be funded. The answer was about $14 million in the buyer's own equity and roughly $24 million in acquisition debt from a commercial lender. The lender had issued a letter describing the debt facility, but the letter was conditional: it offered financing "up to" $24 million, subject to the lender's credit committee giving final approval closer to closing. That is a common feature of acquisition lending, and it is exactly the gap that puts sellers at risk.

In a share or asset sale, the seller's real exposure is not that the buyer changes its mind. It is that the buyer signs a binding agreement, takes weeks of exclusivity off the market, and then cannot actually pay because the money it was counting on never firms up. A letter that promises financing "subject to committee approval" is not the same as funds the buyer can actually draw on. If the purchase agreement lets a buyer keep extending or renegotiating around that uncertainty, the seller can end up strung along for months with no real deal and no ability to go back to the market cleanly.

We treated that gap as the central risk of the transaction and built the purchase agreement around closing it, rather than leaving it as a routine financing condition to be dealt with later.

What we did

1. Required proof of committed financing, not a comfort letter. We negotiated a condition requiring the buyer to remove its financing condition only once it held a binding commitment for the full acquisition debt facility, with any remaining approvals already satisfied — not a conditional "up to" letter. A comfort letter from a lender is not the same as an enforceable promise to fund, and we made sure the agreement said so in plain terms.
2. Set a firm, non-extendable deadline for removing the financing condition. Rather than allowing the usual pattern of informal extensions while a buyer's financing works itself out, the agreement fixed a specific date by which the buyer had to confirm its financing was unconditional. If that date passed without confirmation, the agreement terminated automatically, with no need for either side to take further steps.
3. Built in an escalating, ultimately non-refundable deposit. The buyer's deposit, held in trust, started refundable while conditions were outstanding. Once the buyer waived its financing condition, the deposit became non-refundable regardless of what happened afterward. This meant that once the buyer told our clients the money was ready, the buyer bore the risk if that turned out not to be true.
4. Advised our clients to keep a genuine backup option alive. Before signing, another prospective buyer had also shown serious interest in the pharmacy group. We advised Chidi and Reza not to burn that bridge — to be courteous but honest that they were proceeding with another party, so the door stayed open if anything went wrong. This is standard, ethical practice in a competitive sale process, and it meant our clients were not starting from zero if the primary deal collapsed.
5. Reviewed the lender's commitment language directly against our deadline. As the financing deadline approached, we asked the buyer's counsel for the actual, signed commitment documents rather than a status update. That request surfaced the problem early: the lender had not yet approved the full facility.

The outcome

About a week before the financing deadline, the buyer's lender's credit committee finally reported back — and approved only around $12 million of acquisition debt, roughly $12 million short of the $24 million the buyer had originally planned to borrow. The shortfall traced back to unrelated pressure elsewhere in the lender's own loan portfolio that had tightened its underwriting appetite, not to any problem with Chidi and Reza's business. Niloufar's group scrambled to find a second lender to fill the gap, but bridging a $12 million hole in acquisition financing inside a matter of days was not realistic.

The financing deadline arrived, and the buyer could not confirm unconditional financing. Because the purchase agreement had been drafted to terminate automatically on that date rather than drift into renegotiation, our clients were not left waiting to see what the buyer would offer instead. The agreement ended on its own terms, and the roughly $2.5 million deposit — already non-refundable because the buyer had waived the financing condition weeks earlier believing the funding was secure — was released to Chidi and Reza as agreed.

Because our clients had kept the backup buyer informed and engaged throughout, they were able to reopen that conversation immediately rather than relist the business from scratch. Within about six weeks, they signed a new agreement with the backup buyer at a price close to the original deal, roughly $37.5 million, and closed without a financing condition attached at all, since that buyer was funding the purchase entirely from its own capital.

What could have been a year of uncertainty, or a forced discount to whoever showed up next, instead cost Chidi and Reza a matter of weeks and left them better off than if the first buyer's financing had simply been renegotiated on the spot. It is worth noting what did not happen: there was no lawsuit, no drawn-out claim for damages against the first buyer, and no need to prove anything in court. The outcome turned entirely on documents that were signed months earlier, before either side knew financing would become a problem. By the time the lender's committee delivered its answer, the contract had already decided what would happen next, and neither side had room to argue about it.

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